As is now being widely reported, energy prices are trading at record highs across Europe, with gas prices having risen by 220% since March, and Power prices by 171%.

This has resulted in energy suppliers and brokers going out of business and forcing some energy intensive industries to stop production due to the high cost of energy. OFGEM, the energy regulator, has increased the price cap by £139 per year, and this will almost certainly increase again ahead of April 2022.

There are a number of contributing factors that have led to the prices being at levels we have never seen consistently before.

WME, in partnership with Schneider provide an insight as to the reasons for these rises and why we are seeing unprecedented wholesale prices across Europe.


  • After a lengthy and colder than usual Winter in 2020-21, European gas storages were in desperate need to fill up reserves ahead of the looming Winter heating season. However, a cold Spring season delayed the gas storage injection season.

  • During this year’s summer season, gas supply has seen continuous disruptions through Russian and Norwegian gas pipelines, exacerbating the aforementioned withdrawals from storages during summer, pushing prices up to unseasonably high levels.

  • According to preliminary data, Gazprom has increased total production by 17.8% compared to 2020, producing close to historic highs at 138.6 mcm. At the same time, Gazprom exported less gas to Europe in the first half of September than a year earlier, flowing 7.3bcm this year compared to 8bcm in 2020, the weakest September flows since 2015.

  • In the face of soaring gas prices, all eyes are on the commissioning of the controversial Nord Stream 2 pipeline. The construction of the pipeline was completed on the 10th September. Testing of flows should take anywhere from 2-3 months, putting mid-November as the earliest potential start date.

  • A bidding war for LNG cargoes is ongoing between Europe, Latin America, and Asia, with the latter seeing the most arrivals of late. Rapid demand recovery, coupled with depleted domestic gas storages drew the majority of delivery cargoes to Asian terminals.

  • There has been less generation from wind units so far this year as a result of weather. The hydrological balance in both Spain and the Nordics are also at multi-year lows, due to dry weather and shortened melt season, which reduces the ability of these countries to export electricity to the wider European market.

  • European gas storages are on track to enter next winter season at the lowest level in a decade. In European countries and Britain combined, storage sites are currently around 72% full, compared with 94% full at the same time last year, and 85% full on average over the past 10 years by the end of September, based on the latest Gas Infrastructure Europe data.

  • Carbon had been rather bullish throughout the last year rising from approximately €33/t in January, up to a high of over €63/t. The rise can be attributed to the proposed legislative changes to the EU ETS scheme which will both tighten supply and expand demand to new sectors in the future.

  • Coal prices have also soared due to supply limitations and demand increasing from bullish gas. The beginning of the year saw Australian flooding limit export abilities, followed by Colombian blockades reducing their exports, with Russia, Indonesia and the US also reducing recent supply due to infrastructural shortcomings and shocks. The politically driven Australian-Chinese row also led to China refusing to purchase Australian coal, creating more demand for the commodity coming from the Atlantic basin.



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